Africa

Four of South Africa's biggest banks are owed $53 million by Ellerine, the money-losing furniture firm that African Bank Investments (Abil) cut funding to just before the lender collapsed, documents showed, Reuters reported. The debt reflects the extent to which Abil's failure in August has rippled across corporate South Africa, knocking credit ratings, investor confidence and even hurting small suppliers such as florists and panel beaters.
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South Africa will sacrifice economic expansion in the next two years by limiting spending growth and raising more taxes as it seeks to avoid a debt trap, Bloomberg News reported. The government will cut its expenditure limit by 25 billion rand ($2.3 billion) and plans 27 billion rand of “structural increases” in revenue in the period, the National Treasury said in the mid-term budget released in Cape Town today. “We have reached the turning point,” Finance Minister Nhlanhla Nene told reporters before his budget speech to Parliament.
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Portugal's Novo Banco -- the successor to bailed-out Banco Espirito Santo (BES) -- has moved closer to a rescue deal for its Angolan unit, with the African nation's central bank agreeing a recapitalisation plan for the local business, Reuters reported. Novo Banco will retain a 9.9 percent stake in BES Angola (BESA) under a deal which will see some of its loans to the unit converted into equity, the National Bank of Angola said on Monday.
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Embattled West African iron-ore miner London Mining Plc said on Thursday that its board had decided to place the company into administration, Reuters reported. The company, which owns the Marampa mine in Sierra Leone, has been battling high costs, a sharp drop in iron prices and the impact of the Ebola virus on operations in West Africa. "The board and management will be working with the administrator of London Mining Plc to maintain the Marampa mine as a going concern," the miner said in a statement.
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“We will not kick you when you are down, at least not for a couple of days”: that is the gist of a putative deal struck by 18 global banks this week, which agreed not to pull abruptly out of contracts with each other if one of them hits the buffers. As modest as that may sound, regulators see it as the foundation of a firewall to halt the spread of future financial crises, The Economist reported. The agreement concerns derivatives, contracts whose value “derives” from the performance of an underlying asset such as a share, currency or bond.
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The largest global banks will have to hold more capital and liabilities than previously reported that can automatically be written off in a crisis -- as much as a quarter of risk-weighted assets -- as regulators take on lenders deemed too big to fail. The Financial Stability Board is developing minimum standards that will limit the double-counting of capital banks use to meet existing international rules, according to an FSB working document sent for comment to Group of 20 governments and obtained by Bloomberg News.
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The International Monetary Fund Monday backed a gradual exchange of government bonds around the world with new contracts to counter risks that holdout creditors could disrupt potential debt restructurings, The Wall Street Journal reported. The IMF, along with some investors and economists, have warned that U.S. legal rulings that forced Argentina’s hand in a long battle with holdout creditors could imperil other debt operations because they give a small minority outsized power.
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Unsecured Loans Beset South Africa

When in 2011, Maria Cristina Erasmus wanted to fix up her house, the 63-year-old retiree took out a bank loan of 50,000 South African rand ($4,465). When she wanted to buy furniture, she borrowed more, The Wall Street Journal reported. Mrs. Erasmus and her taxi-driver husband offered no collateral but agreed to pay 30% annual interest—about four times the country's average lending rate. Now, she can't repay the 100,000 rand that is owed. "We moved to a cheaper house, but we couldn't do it," Mrs. Erasmus said.
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Forty-one public companies at risk of insolvency in Angola are being evaluated by the Economy Ministry and some may be terminated to avoid continued waste of public resources, the secretary of State of Economy said in Luanda., Macauhub reported. Laura Alcântara Monteiro, who spoke at the end of the meeting of the Committee for the Real Economy of the Council of Ministers, said the extinction of some of these units should be one of the solutions but that analysis work was still underway and should be completed in the coming weeks.
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Failed South African lender African Bank Investments (Abil) plans to re-list on the Johannesburg exchange in February and may expand into secured lending and insurance, its government-appointed supervisor was quoted saying by a local newspaper on Friday, Reuters reported. Tom Winterboer, appointed by the central bank to restructure the unsecured lender after it faltered under a mountain of bad debts in August, also told Business Day the bank had collected "well over" 2 billion rand ($182 million) from borrowers over the past month.
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